TY  - UNPD
A1  - Milivojevic, Lazar
A1  - Tatar, Balint
T1  - Fixed exchange rate - a friend or foe of labor cost adjustments?
T2  - Working paper series / Institute for Monetary and Financial Stability ; 152
N2  - The authors examine the effectiveness of labor cost reductions as a means to stimulate economic activity and assesses the differences which may occur with the prevailing exchange rate regime. They develop a medium-scale three-region DSGE model and show that the impact of a cut in the employers’ social security contributions rate does not vary significantly under different exchange rate regimes. They find that both the interest rate and the exchange rate channel matters. Furthermore, the measure appears to be effective even if it comes along with a consumption tax increase to preserve long-term fiscal sustainability.
Finally, they assess whether obtained theoretical results hold up empirically by applying the local projection method. Regression results suggest that changes in employers’ social security contributions rates have statistically significant real effects – a one percentage point reduction leads to an average cumulative rise in output of around 1.3 percent in the medium term. Moreover, the outcome does not differ significantly across the different exchange rate regimes.
T3  - Working paper series / Institute for Monetary and Financial Stability - 152 
KW  - Structural policies
KW  - Labor cost adjustments
KW  - Exchange rate regime
KW  - Local projection
KW  - DSGE
Y1  - 2021
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/56449
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-564498
UR  - https://www.imfs-frankfurt.de/fileadmin/user_upload/IMFS_WP/IMFS_WP_152.pdf
PB  - Johann Wolfgang Goethe-Univ., Inst. for Monetary and Financial Stability
CY  - Frankfurt am Main
ER  -